Post-employment Benefits, including Pensions

Date recorded:

The Board considered a formal proposal to add two projects to the Board's technical agenda. The staff noted that the proposal had already been discussed with the SAC and the Trustees, as required by the Board's Due Process Handbook. The two projects would represent:

  • (a) a targeted series of improvements to IAS 19, to be completed within a four-year period; and
  • (b) a comprehensive review and revision of the existing pension accounting model, to e undertaken in conjunction with the FASB.

The Four-year Project

The basic pension accounting model would remain unchanged.

The Board would focus on removing the 'add-ons' to the basic model, in particular the smoothing and deferral mechanisms, such as the corridor, the assumed rate of return on plan assets, and the recognition of gains and losses. The Board would reconsider the definitions of defined benefit and defined contribution plans, with special attention being given to cash-balance plans. In addition, the Board would consider providing additional guidance on settlements and curtailments and consider presentation of amounts related to post-employment benefits in the financial statements. The staff expressed reservations as to whether the Board could reasonably address settlements and curtailments in the time allotted and noted that this would be the first candidate for removal if the project timetable came under strain.

Comprehensive project

The comprehensive project was already underway at the FASB. The project plan would ensure that the IASB was (during the four-year project) kept up-to-date with developments, such that any differences of opinion could be identified quickly. The Board agreed unanimously to add the post-employment benefits project to its technical agenda. They also agreed with the approach, although it was evident that several Board members were sanguine about the four-year plan.

Working group

The Board agreed that it would be advisable to appoint a working group to assist it with the four-year project. Presentation matters would be referred to the existing Financial Statement Presentation Working Group. Thus, the new working group would need pension experts, actuaries, etc.

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